‘Nigeria Spent N3.9tn on Fuel, Electricity Subsidy in Four Years’


Chineme Okafor in Abuja
Nigeria spent about N3.9 trillion to subsidise electricity and petrol consumption in the country between 2015 and 2019, PwC Nigeria has disclosed.

PwC in a webinar conducted on the potential impacts of the Covid-19 on Nigeria’s power sector, explained that between the aforementioned years, the country’s expenses on petrol subsidy amounted to N2.3 trillion while that of electricity was N1.63 trillion.

According a presentation made by the Director of Management Consulting PwC West Africa, Bimbola Banjo, during the webinar, in the power sector alone, the federal government approved a loan of N213 billion for power Discos in 2014 as part of the Nigeria Electricity Market Stabilisation Facility (NEMSF) by the central Bank of Nigeria (CBN; in March 2017, the Federal Executive Council (FEC) equally approved N701 billion CBN facility as Power Assurance Guarantee for the Nigerian Bulk Electricity Trading Plc NBET for a period of two years; and in August, 2019, the government again signed the release of N600 billion for the power sector which source said was meant for the shortfall in the payment of monthly invoices by key stakeholders in the sector.

“The federal government has expended about N2.3 trillion as petroleum subsidy for the 4 years between 2015 – 2019. The tariff shortfall in the electricity sector which in substance is an electricity subsidy payable by the federal government stood at N1.63 trillion between 2015 and 2019,” the PwC explained.
It stated that: “Both subsidies alone amount to about N3.9 trillion which represents about 31 per cent of current foreign reserves and 37 per cent of the 2020 budget.”

During the webinar, the Chief Executive Officer (CEO) of Benin Disco, Funke Osibodu, disclosed that the Covid-19 pandemic has adversely impacted the wages and earning ability of practically all Nigerians, with the greatest impact on daily wage earners who constitute the largest sub-segment of the adult working population.

Osibodu, explained that due to closure or scale down in operations, there is now a reduced energy consumption by commercial and industrial customers who subsidise the power industry with their higher tariff. This, she said has resulted in reduced revenue from such industrial customers who have the highest ability to pay.

On the other hand, she noted that there is increased energy available to residential customers but with an increase in non-payment, consumer electricity theft through meter bypass and illegal connections.
Osibodu stated that Covid-19 has impacted the cost of delivering electricity to Nigerians as well as the revenues of the complete value-chain.

“This is transparently manifested through electricity distribution companies, in terms of the inability of customers to pay their bills and the resultant reduction in revenue collections.
“This can affect the continuous availability of the increased and improved power to residential customers if not managed,” Osibodu said.

She noted that other Covid-19 related challenges to the sector included disruption to the materials supply chains, increase in operational complexities and cost of operations, specific capital investment tailored to ensure that there is consistent electricity supply for the stay-at-home restriction and increase in foreign exchange rates which will further affect the tariff.

In her suggestions for short and medium-term adjustments needed by the sector to overcome the impact of the virus, Osibodu stated that from the customers’ perspective, efficient energy management through only putting on only essential appliance when needed as well as energy saving appliances would be necessary now.
“With increase in power availability to residencies and expected increase in billing, energy consumption savings is essential, at least 30 per cent of electricity is wasted,” she said.

She also harped on the need to embrace prepaid metering to consciously make the cost of service cheaper.
With regards to possible government support, she requested that they, “pay all existing outstanding bills at federal, state and local government levels,” adding this would have a major impact on market liquidity and sustainability.

She also called for the government to pass on the current reduced international gas price and fix into naira the cost of gas to power producers with federal government especially absorbing all exchange fluctuations going forward.

According to her, government could also, “provide moratorium – minimum of 12 month – in payment of CBN and federal government related facilities in the power sector to cover for Covid-19 adjustment period,” in addition to, “removal of the increase of 30 per cent on the duty on meter importation to ensure that meters are more affordable.

“Government support in changing public mindset/culture from power should be a free social service venture to a pay for power supplied to ensure improved service delivery and more power,” Osibodu added.

With regards to regulation, she posited that the Nigerian Electricity Regulatory Commission (NERC) could suspend and review regulations such as the minimum remittance order which according to her have adverse impact on the market and Discos’ operations especially as it relates to their ability to remit monies upstream.

A review of MAP metering pricing to allow MAP to continue metering at prices that is not negative and consideration and implementation of an intervention fund for the market similar to that which has been implemented in other sectors by the government, were the other measures Osibodu suggested could be taken to revive the sector post-Covid-19.